Speaking success: managerial tone in earnings conference calls and financial performance

Purpose: Drawing on signalling and impression management theories, this study aims to examine a bidirectional association between managerial tone in earnings conference calls and financial performance. Design/methodology/approach: The sample includes non-financial firms listed in the FTSE 350 index during the period 2010–2015. Managerial tone was measured using positive and negative keywords based on the Loughran-McDonald Sentiment Word Lists, while return on assets was used as a proxy for firms’ financial performance. Findings: The findings indicate that current financial performance positively affects the managerial tone in earnings conference calls. Likewise, the results also show that there is a positive relationship between managerial tone in earnings conference calls and firms’ future financial performance. Practical implications: The results have important implications for top management to use more virtual communication media (i.e. earnings conference calls) to continue managing their relationships with financial stakeholders and helping them better understand financial performance, especially in countries where holding such calls is not yet part of firms’ policy. Originality/value: To the best of the authors’ knowledge, this is one of the first studies that explore the relationship between managerial tone in earnings conference calls and financial performance. Overall, this study contributes to managerial tone literature and holds significant theoretical and practical implications.